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Oil prices, exchange rates and stock markets under uncertainty and regime-switching

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  • Roubaud, David
  • Arouri, Mohamed

Abstract

We contribute to the ongoing literature on the interactions between oil prices, exchange rates and stock markets by considering the effects of economic policy uncertainty (EUP). Based on a VAR and a multivariate Markov switching vector autoregressive (MS-VAR) models, we show (i) significant interrelations between currency, oil and stock markets; (ii) relationships between the variables are rather non-linear; (iii) links between the variables change from one regime to the next, but they are stronger during volatile periods; and (iv) oil plays an active role in the transmission of price shocks to both the exchange rate and stock markets.

Suggested Citation

  • Roubaud, David & Arouri, Mohamed, 2018. "Oil prices, exchange rates and stock markets under uncertainty and regime-switching," Finance Research Letters, Elsevier, vol. 27(C), pages 28-33.
  • Handle: RePEc:eee:finlet:v:27:y:2018:i:c:p:28-33
    DOI: 10.1016/j.frl.2018.02.032
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    1. repec:eee:ecmode:v:76:y:2019:i:c:p:153-171 is not listed on IDEAS
    2. repec:spr:nathaz:v:95:y:2019:i:1:d:10.1007_s11069-018-3473-y is not listed on IDEAS
    3. repec:eee:eneeco:v:76:y:2018:i:c:p:584-593 is not listed on IDEAS
    4. repec:eee:jrpoli:v:61:y:2019:i:c:p:585-602 is not listed on IDEAS

    More about this item

    Keywords

    Oil price; US effective exchange rate; Stock markets; Uncertainty;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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